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Sunday, July 16, 2017

How will GST disrupt the CA/accounting, tax and audit profession

In India, the Chartered Accountancy(CA) professional is synonymous with accounting, audit and tax-this does not detract from other professionals of course like CS, CMA, LLBs and tax practitioners. The advent of India's largest indirect tax reform viz GST has the scope to transform the financial professionals industry tremendously. In the short term, there is a LOT of work due to impact analysis, transition, old cases closure etc for which professionals are minting money. But in the medium/long term, the picture is much less clear. Picture the scenario in 2years, where B2B invoices are uploaded online and matched(with government receiving its tax on time) for seamless credit. The income tax audit of these entities can be substantially triangulated with GSTIN data to reconcile revenue and COGS. Would audit become redundant? There are arguments for and against this:
First the positive arguments for simplification( and hence CA revenue declining)

  1. Excise, Service Tax, VAT audits all replaced by a single GST audit. 
  2. Invoice level matching
  3. Government audit interest declining once it receives its tax payment on time
  4. Statutory audit simplified from indirect tax/compliance
  5. Lesser possibility of people evading direct tax while reporting higher GST revenues
Arguments for complexity (and hence bright future for CAs)
  1. Multiple GST rates-hence classification confusions
  2. Residual 18% rate vs lowest 5% slab, chances for government to raise aggressive tax positions
  3. ~40% GDP still out of GST tax net-hence need to check omissions
  4. Reverse Charge for purchases from unregistered vendors-substantial complexity
  5. Non GST expenses like salaries, utilities, taxes-hence cannot prepare full P&L
  6. Multiple GST registrations for Pan India entity, need for record keeping/reconciliations
  7. B2C Invoices uploaded in summary NOT at invoice level-so need for audit here
There will of course be 'Non professional' work such as mismatch reconciliations, vendor review etc but this will be outsourced I suppose. 

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